THG confirms beauty spinoff; H1 revenue tops £958m

The Hut Group CEO Matthew Moulding

Manchester-based online beauty and nutrition retail giant The Hut Group (THG) announced on Thursday it will spin off its online beauty business THG Beauty next year in a stock market listing.

THG, which raised over $1 billion from SoftBank Group earlier this year, may also seek to spin off its other main businesses THG Nutrition and THG Ingenuity, its tech and logistics unit.

THG, which went public last year, said the listing would allow THG Beauty — home to brands including Lookfantastic, Cult Beauty and Dermstore — to grow its own-brand portfolio.

The moves announced on Thursday are part of the company’s ongoing and complex restructuring plan and come a month after it bought online beauty retailer Cult Beauty.

THG also announced results for the half-year ending June 30, 2021, showing revenue rose 41.9% to £958.8 million and reported loss before tax was £81.3 million.

THG’s preferred earnings figure “adjusted group EBITDA” rose to £81.2 million, up 38.6% on H1 of 2020.

Sales of THG Beauty jumped 55.9% to £460.8 million in the first half, with THG Nutrition up 27.3% to £328.4 million and THG Ingenuity up 39.7% to £85.8 million.

Analysts at Barclays have estimated THG Beauty could be worth about £4 billion but they warned that valuing the business is difficult “without disclosure of standalone margins.”

THG said: “A separate listing for THG Beauty will position the business very well to focus investment in its key growth areas, including own-brand portfolio expansion …

“The decision of whether to separately list THG Nutrition and the timing will remain under consideration.”

On THG Ingenuity the company said “… the group retains ultimate discretion and flexibility to determine any subsequent IPO, or other structural option for Ingenuity, with the objective to maximise value for all shareholders.”

THG executive chairman and CEO Matthew Moulding said: “I am delighted to announce a strong first half performance across all divisions, as we continue to invest significantly in support of our strategic growth ambitions.

“This investment is across our entire business, including our infrastructure, namely our recently-opened ICON campus and our global distribution network, in our Ingenuity platform, in building leading digital brands, and most importantly, in our people.

“In May, we announced the financial and trading partnership opportunity with SoftBank, one of the world’s leading technology investors.

“We are only at the start of this relationship, but we are pleased to have already established multiple live commercial partnerships between the SoftBank portfolio and our Ingenuity platform.

“We continue to see an acceleration in levels of enquiry from global enterprises looking to leverage the Ingenuity platform, and I believe the global growth opportunity for Ingenuity to be unparalleled.

“Today we also update on the roadmap to separating our key trading divisions, and announce our commitment to list THG Beauty in 2022, which we believe will create further value for our shareholders.

“We are also proud to be launching our 2030 sustainability strategy, outlining our key priorities and commitments in the coming weeks.”

AJ Bell Investment Director Russ Mould said: “A corporate divorce looks to be on the cards at e-commerce firm THG but rather than expensive or messy, the company will be looking for this break up to generate a windfall in the form of enhanced valuations for its individual businesses.

“Significantly it is not just unveiling plans for a separate listing of its beauty division next year but also trailing a divvying up of its nutrition arm and Ingenuity technology and logistics platform too.

“THG is banking on these businesses being ascribed more value by the market as separate entities and this is perhaps most pertinent to the Ingenuity arm which has generated a lot of the excitement around the stock since its 2020 listing.

“The platform has been sold as an out of the box solution to third parties looking to launch an e-commerce service in much the same way as Ocado’s own platform is sold to global supermarkets as a means of offering online groceries.

“THG’s agreement in May to sell a 20% stake in this unit to Japan’s Softbank provided something of an endorsement of this potential.

“This transaction also implied that THG has faced a discounted valuation for its prospective jewel in the crown by having it hidden behind other moving parts.

“Ingenuity remains a jam tomorrow opportunity though.

“It is generating decent levels of growth but as today’s first half results show it represents less than 10% of group revenue.

“An investor day next month to highlight the potential of the platform will be closely scrutinised.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.